In Depth

The 7th Circuit Court of Appeals has upheld a $180 million settlement and grant of $43.5 million in attorney fees in a dispute
between retirement plan participants and their former employer. Some class members objected to the amount of attorney fees,
but the 7th Circuit saw no reason to disturb the lower court’s decision.

This appeal comes nearly eight years after the original action began. A class-action lawsuit was filed in 2002 against the
Rohm and Haas Co. Retirement Plan on behalf of all plan participants and beneficiaries who took a lump sum distribution after
Jan. 1, 1976. Recipients believed they should have received payments that included the present value of future cost of living
adjustments that would have been included had they chosen to receive pensions as an annuity.

The District Court and 7th Circuit concluded that a COLA is an accrued benefit, and the 7th Circuit remanded for a determination
of damages. Then the issue arose regarding whether the early retirees were entitled to damages. The two sides reached a settlement
that provided that each early retiree would receive roughly 3.5 percent of his or her original lump sum, unless the COLA on
a normal-retirement-age-based annuity outweighed the early-retirement subsidy. Several groups objected, including the “Adamski
Objectors,” who are a part of the appeal before the 7th Circuit in the instant case. They argued that early retirees
should have received separate counsel and that the settlement was blatant discrimination. They also objected to the request
for $43.5 million in attorney fees, which was nearly 25 percent of the total settlement of $180 million.

The District Court had a fairness hearing and approved the settlement and attorney fee request. It also determined objector
Mark Jackson was not allowed to opt out.

In Gary Williams and Nancy Meehan v. Rohm and Haas Pension Plan, Nos. 10-1978, 10-2175, 10-3713,
the 7th Circuit found that the District Court adequately addressed the expected value of the early retirees’ claims,
and it recognized that at the time, the early retirees’ claims rested on unsettled law. The District judge concluded
that the early retirees’ success was uncertain and that the settlement reasonably compensated them for their claims.

“That conclusion was not so clearly erroneous as to make approval of the proposed settlement an abuse of discretion,”
wrote Judge Michael Kanne.

The District Court also didn’t abuse its discretion by not creating a separately represented subclass of early retirees
or by finding that the class counsel had adequately represented the early retirees. It also affirmed the denial of Jackson’s
opt-out request.

Regarding the attorney fees, the appellate court found the District judge assessed the amount of work involved for the attorneys,
the risks of nonpayment, and the quality of representation. The judge found that a pure percentage fee approach best replicated
the market for ERISA class-action attorneys, and the objectors haven’t shown this finding to be an abuse of discretion,
wrote Judge Kanne.

Regarding the risk of nonpayment, the objectors argued that rulings from District Courts in other circuits paved the way
for the class’s victory on the COLA issue, thus minimizing the risk in this case. While those prior decisions bolstered
the class’s argument that the plan’s damages calculation would violate ERISA, no appellate court had addressed
the issue before the District Court approved this settlement.

“The district judge has become intimately familiar with this litigation over the past eight years, and we are confident
that she properly assessed the litigation risks facing the early retirees. Although the Adamski Objectors urge us to remand
and instruct the district court to perform a more thorough risk analysis, we recognize that the best we can hope for in awarding
attorney’s fees is rough justice,” he wrote. “Accordingly, we see no reason to disturb the district court’s
assessment of fees.

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